Boost Your Credit Score

These days, it's absolutely critical to routinely monitor your personal credit information and overall credit health. You want to be on the lookout for fraud, but you also want to track your creditworthiness so you don't overpay when it comes time to borrow money. The higher the score the better your credit-and the more likely you are to get loans and get better interest rates on those loans. Lenders-banks, credit card companies, mortgage lenders-lean heavily on it when they are deciding whether or not to give you a loan.

Mellody's 5 tips to boost your credit score:

First, request a free copy of your credit report and check it for errors. You can do this by visiting www.annualcreditreport.com. You can get one credit report from each of the three major credit bureaus here. This site offers a credit report, not credit scores. If you want to know your FICO score, you can go to www.myfico.com. Now, checking your report for errors may seem basic, but sometimes there are mistakes, and you can improve your score by notifying the credit bureau and reporting agency of these errors. Once you know your score and decide to improve it, the best way to do so is to reduce debt. That almost always means paying down your credit card debt as aggressively as you can. Move as quickly as you can toward having just one credit card, lower your usage of credit cards, and focus on reducing your debt level rather than attempting to spread it over multiple accounts -- which in no way helps your credit rating and can actually hurt. The FICO looks at the total amount of credit you have available and how much of it you use. The higher a percentage of your credit you use, the worse your score. Most experts recommend staying under 35 percent. People with average scores are in the 40% to 50% range. As you might imagine, late payments are a big deal: A single late payment can drop your score by 50 to nearly 200 points, depending on where your score starts. 30 or 60 day late payments don't do lasting bad damage. But a 90-day late payment hurts your score for 7 years.

Once the big things are under control, a great way to incrementally improve your score is to set up payment reminders. Some banks offer payment reminders that you can receive either by email or text message. You may also want to consider enrolling in an automatic paying method if it is available, so that you do not fall behind on any bills. Auto-pay makes sure that payments are debited from your bank account on time.

About Mellody Mellody is responsible for firm-wide management and strategic planning, overseeing all operations outside of research and portfolio management at Ariel Investments (www.arielinvestments.com). Additionally, she serves as chairman of the board of trustees for Ariel Investment Trust.